Saturday, April 28, 2012

NOMINAL AND REAL VALUE

Let us take the American Silver Eagle coin made of 1 ounce of silver. It has a nominal value of 1 USD.

Similarly the Canadian Silver Maple Leaf coin made of 1 ounce of silver has a nominal value of 5 Canadian Dollars.

But the real value of these coins is much more than the value marked on them. The value depends upon
the price of silver on any given date (and time!!).

The value of both these coins as on date is around 35 US Dollars (roughly).

The intrinsic value of a coin should be less than the face value. The Canadian government found that the
cost of making a one pence coin was much more than one pence. So they have stopped minting these coins.

The 5 rupee cupro-nickel coin of India had a much more value than Rs.5. So people melt these coins and make blades and cheap jewelry out of them it is told.

The Indian Government mints 150 rupees commemorative coins. Can't they make these coins out of
say 10 grams of silver?